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 after commercial copyright pirates and trademark counterfeiters.

In the field of trademark protection, we are concerned that foreign trademark owners do not appear to be receiving national treatment with regard to their well-known marks. China has recognized nearly 200 marks as "well-known," none of which is a foreign mark. Another national treatment concern was addressed, however, in late 2002, when China amended its regulations to permit foreign-invested enterprises to file for trademarks without an agent, something only Chinese companies previously had been entitled to do.

We urge China to pursue a sustained, transparent effort to punish and deter copyright piracy, trademark counterfeiting and trade in pirated and counterfeit products; dedicate more resources to enforcement, and undertake more frequent, unannounced police raids in pursuit of IPR infringers; increase coordination between the various national and local authorities charged with IPR enforcement; ensure that China's officials take a serious and consistent approach to sentencing, including setting and enforcing deterrent levels of fines; and reduce the high thresholds for criminal prosecutions that, in practice, prevent effective application of China's criminal law to IPR violators; provide adequate training for patent and trademark examiners and IP enforcement agents; and ensure that criminal action can be taken against exports of pirated or counterfeit product. As a priority matter, China should ratify and implement the two WIPO Internet Treaties at the earliest possible opportunity.

PARAGUAY

Paraguay continues to have problems in providing protection to copyrights and trademarks, both with respect to poor internal enforcement and weak border enforcement. The USTR identified Paraguay as a Priority Foreign Country in January 1998 as part of Special 301 Out of Cycle Review. The subsequent 301 investigation terminated with the signing of a comprehensive Memorandum of Understanding (MOU) on the protection of intellectual property in 1998. We still are concerned by several issues, including: the involvement of organized crime in piracy and counterfeiting operations; the relatively few resources that are provided for criminal investigations, raids and investigations, and the attendant lack of those activities; and the lack of willingness on the part of the judiciary to impose deterrent sentences. The MOU expired in January of 2003, but USTR and Paraguay have agreed to extend the provisions of the understanding until it can be renegotiated, likely in the fall of 2003. At that time we will review Paraguay's progress in meeting the requirements of the MOU as well as the other matters in order to determine the appropriate goals for any renegotiated MOU.

May 1, 2003